Thursday, April 4, 2002
Economic stimulus package may affect business returns
After months of negotiations, Congress finally passed a long-awaited economic stimulus package. The Job Creation and Worker Assistance Act of 2002 was signed into law on March 9, 2002, but some of its provisions are retroactive to 2001. Herepis a look at whatpis included in this new law:
Bonus depreciation. Businesses can write off "bonus" depreciation for certain assets purchased after September 10, 2001, and before September 11, 2004. This amounts to an upfront 30% deduction for the cost of most office equipment and computer software, most manufacturing equipment, and certain property improvements. This bonus depreciation is in addition to the regular first-year depreciation deduction. For luxury autos, the first-year depreciation deduction increases from $3,060 to $7,660.
Net operating losses. The new law extends the net operating loss carryback period to five years. Before, you could generally carry back losses for only two years. A loss carryback can be used to offset prior-year income to generate an immediate tax refund.
Unemployment benefits. The new law extends unemployment benefits an additional 13 weeks in states with at least a 4 percent unemployment rate. Based on the bill, Gov. Tony Knowles recently signed a 13-week extension of jobless benefits for Alaskans who run out of their regular unemployment benefits. The additional benefits are fully funded by the federal government.
The Liberty Zone. Businesses located in a specified area of lower Manhattan deemed the "New York Liberty Zone" will receive special tax breaks to help rebuild and recover from the September 11 attacks.
Other breaks. For 2002 and 2003, teachers receive a new deduction for their out-of-pocket costs for classroom supplies. And therepis a two-year extension for the work opportunity credit, the welfare-to-work credit, and the electric vehicle credit.
If you already filed your 2001 tax return, you may need to amend your return to take advantage of the new tax breaks.
<> Tax Tips is provided by Joe Buckley, a certified public accountant in Homer. He can be reached at 235-6711.